Big Tech earnings slam into a market in revolt over AI spending
Investors are reacting negatively to the massive capital expenditures by Big Tech companies on artificial intelligence, despite strong revenue growth. Alphabet's stock dropped significantly as market sentiment shifted from rewarding AI investment to prioritizing immediate cash flow and profitability.
Why it matters
This shift in investor sentiment could fundamentally alter the funding landscape for AI development and the valuation of the world's largest technology companies.
For years, US technology giants had a tacit agreement with investors: The companies could spend lavishly on artificial intelligence, and the stock market would reward them long as their revenues were rising. That deal is suddenly breaking down.
Alphabet Inc. shares plunged more than 7% on Thursday, their worst day in over a year after the company raised its capital expenditures in 2026 to as much as $205 billion and reported that free cash flow turned negative in the second quarter for the first time since its 2004 initial public offering.
Nevermind that Google’s parent also delivered a whopping 82% increase in cloud-computing revenue, far surpassing Wall Street estimates. Investors were worried about all the spending.
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